The risk of mortgage default is one-third lower for people with energy efficient homes, according to a recent study. Energy efficient homes can save up to $250 per month, Alic writes, an amount that for many households could be the difference between foreclosure and mortgage repayment.

Here’s some new impetus for those sitting on the fence over household energy efficiency: the risk of mortgage default is one-third lower for people with energy efficient homes, according to a recent study.

The study, released in March by the University of North Carolina’s Center for Community Capital, claims that energy efficiency can be the difference between mortgage repayment and foreclosure.

The Home Energy Efficiency and Mortgage Risks study examined 71,000 home loans from 38 states and the District of Columbia, with loans taken out from 2002 to 2012. The results showed that the chances of mortgage default were one-third lower for those with energy efficient homes.

The HERS index is the brainchild of the Residential Energy Services Network (RESNET), which is a nationally recognized system for inspecting, testing and calculating a home’s energy performance. The intention is to give buyers a better idea of a home’s energy efficiency before purchasing.(Related article: In Artificial Markets, Invest in Energy - Life Requires Energy)

It might sound like a bit of a stretch, but it’s as simple as saving on utility bills to make mortgage payments.

While the theory is indeed quite simple, the study is being lauded as the first real academic study to provide a link between mortgages and energy efficiency, so it’s being taken rather seriously. Other academics like the evidence.

It’s all about solvency, after all. Energy efficient homes can save up to $250 per month—an amount that for many households could be the difference between making the next mortgage payment.

“The finding that the lower the HERS Score, the lower the mortgage risk should increase consumer, builder, lender, real estate agent and appraiser confidence in the HERS Index Score. In light of these findings, RESNET calls on the mortgage industry to rationalize the underwriting process to take in consideration energy savings in the mortgage loan,” Baden noted on the sidelines of a conference in Washington, DC at the time of the report’s release.

And here’s where it could get more interesting: Baden and others think the report’s findings will lead to revolution of sorts for home-buying. To that end, it urges lenders to lower risk rates for energy efficient homes and federal loan programs to employ more flexibility in such cases.

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